An open door for firms

A new note in the Viewpoint series provides a handy summary of much of the recent research on the impact of business entry reforms. Unsurprisingly, cutting the costs and number of procedures to start a business results in more firms entering the formal market. To give one example, the creation of a one-stop shop in Mexico resulted in a 5% increase in new firms.

On top of that, recent research has found that a large percentage of new firms survive and grow (with a potential boost to employment) and that these new firms tend to increase productivity and output. Table 2 below gives an idea of the magnitudes involved in new firm creation -- a pretty significant benefit when one considers the relatively low cost of reforming business entry.